Cartier International AG et al. v. British Sky Broadcasting Limited et al. (case No: HC14C01282, October 17, 2014)
On October 17, 2014, the High Court in London handed down a landmark decision ordering internet service providers to block or impede access to websites on the basis that they are structured to infringe trademark rights by selling counterfeit goods. Although blocking orders directed against copyright infringement have for some time been issued under Section 97A of the Copyrights, Designs and Patents act of 1988 (CDPA), this decision is thought to be the first time an EU court has issued such an injunction based on trademark infringement.
The case arose when several claimants (collectively “Richemont”) sought an injunction against the five largest broadband internet service providers in the U.K. (collectively the “ISPs”) to block or impede access to certain websites Richemont claimed were selling counterfeit goods and infringing its CARTIER, MONTBLANC, IWC, and other marks (the “Trademarks”). The defendant ISPs account for 95% of the broadband internet access for the U.K. Richemont’s claim centered on third-party websites selling counterfeit goods (“Target Websites”), some of which made it very clear that they were selling “replica” goods.
The High Court based its jurisdiction on Article 11 of the 2004 Directive of the European Parliament on the Enforcement of Intellectual Property Rights (the “Enforcement Directive”) which provides that “Member States shall ensure that rightholders [sic] are in a position to apply for an injunction against intermediaries whose services are used by third parties to infringe an intellectual property right.” It held that the following threshold conditions must be met in order for a website-blocking injunction to issue based on trademark rights:
- The ISPs must be intermediaries within the meaning of the third sentence of Article 11;
- Either the users and/or the operators of the website must be infringing the claimant’s trademarks;
- The users and/or the operators of the website must use the ISPs’ services to do that; and
- The ISPs must have actual knowledge of this.
The High Court found that there was no dispute that the ISPs were intermediaries and that the Target Websites were infringing the Trademarks. Further, it held that the ISPs “have an essential role in these infringements, since it is via the ISPs’ service that the advertisements and offers for sale are communicated to 95% of the broadband users in the U.K.” Finally, there was no dispute that the ISPs had actual knowledge of the infringements as Richemont had so informed them via an email in March 2014.
Discussing the justification for ordering ISPs to block the Target Websites, the High Court noted the public interest in preventing trademark infringement, particularly where counterfeit goods are involved. It also noted that the “freedom of internet users to receive information . . . plainly does not extend to the right to engage in trademark infringement, particularly where it involves counterfeit goods.”
In arguing against the injunction, the ISPs relied heavily on alternative measures available to Richemont. These included direct actions against the operators of the Target Websites (e.g. cease and desist letters and infringement suits), notice and takedown actions through the website hosts, and domain name seizures through UDRP actions. The High Court noted that letters to the Target-Website operators were simply ignored while registrant addresses outside of the U.K., such as in China, presented obvious difficulties to jurisdiction and enforcement. Further, the Target-Website operators could simply change their URL or IP address in response to any takedown or domain name transfer. On balance, the High Court found that none of the alternative measures available to Richemont would be equally effective, but less burdensome, than the requested blocking order. It made it clear, however, that rightsholders bear the cost and responsibility of monitoring offending websites and accurately updating service providers.
Regarding the likely effectiveness of blocking orders in cases of trademark infringement and counterfeit goods, the High Court relied on empirical data on the effectiveness of 97A orders. A report from a website-tracking company showed that in a one-year period, access to websites blocked by service providers under 97A orders decreased by over 71% in the U.K. In that same time period, access to those sites outside of the U.K. increased by over 27%. The High Court commented that “there is no reason to believe that the blocking would be materially less effective in reducing traffic to the Target Websites” and that “if anything, it is probable that it will be even more effective” due to the apparent lack of consumer loyalty to websites that sell counterfeit goods.
The High Court granted the orders substantially in the form sought by Richemont, with the following three caveats: (i) affected subscribers would be able to apply to the court for discharge or modification of the orders; (ii) the online notice that the website had been blocked would identify the party who applied for the blocking order and state that affected users have the right to apply to the court to discharge the order; and (iii) a “sunset clause” be set for the end to the blocking order after a defined period – the High Court suggested two years but left the issue open for argument by either side.
This decision provides brand owners with a powerful new tool in the fight against online counterfeiting. Further, because the technology to implement these orders is already in place to support 97A orders, requests from law enforcement, and parental controls, there will likely be little delay in implementation. Blocking orders allow brand owners to monitor the offending website and update service providers to combat circumvention techniques such as changing domain names or IP addresses. It remains to be seen, however, what other methods counterfeiting websites may employ to side step a blocking order. Time will also tell if requests for blocking orders based on other forms of trademark infringement will issue absent the weight of public interest involved in the sale of counterfeit goods.