Susan Barty, Tom Reid and Tom Scourfield give a detailed account of the ruling in Cartier International AG & Ors v British Sky Broadcasting Ltd & Ors and comment on its potential impact
In Cartier International AG & Ors v British Sky Broadcasting Ltd & Ors  EWHC 3354 (Ch), the High Court has concluded that brand owners are entitled to orders requiring ISPs to block or impede access by their subscribers to web sites which advertise and sell counterfeit goods. In doing so, Arnold J has granted a novel remedy under Article 11 of the Enforcement Directive, extending the court's existing jurisdiction (in respect of claims of copyright infringement) to claims relating to allegations of trade mark infringement. It remains to be seen whether this will lead to a deluge of similar applications by other brand owners, but it certainly represents a potentially significant new tool in the brand owner's armoury.
The claimants (collectively, 'Richemont') are the owners of a large number of UK Registered trade marks for Cartier, Montblanc, IWC and other luxury brands. The defendants (Sky, BT, EE, TalkTalk and Virgin, collectively the 'ISPs') are the five main retail internet service providers in the UK, between them having a market share of approximately 95% of UK broadband users. Richemont applied to the High Court seeking orders requiring the ISPs to block access to six web sites (the 'Target Websites') which were advertising and selling counterfeit goods which infringed the claimants' trade marks. The claimants' sought such relief under Article 11 of the Enforcement Directive. While orders of this nature (Article 8(3) of the Information Society Directive (Directive 2001/29/EC) (the 'InfoSoc Directive')) are commonplace now in respect of copyright infringement claims, the award of a similar order in respect of trade mark infringement cases is a novel remedy.
The High Court granted the blocking orders substantially in the form sought by Richemont, subject to a number of additional safeguards to ensure that the orders struck the correct balance between the protection of the rights of Richemont on the one hand, and the ISPs' freedom to carry on business and Internet users' freedom to receive information on the other.
In addition to permitting the operators of the Target Websites to apply to court to discharge or vary the orders and permitting the ISPs to apply to court to discharge or vary the orders in the event of a material change of circumstances, Arnold J introduced three additional safeguards:
(a) the order should expressly permit affected ISP subscribers to apply to the court to discharge and vary the orders;
(b) when a user attempted to access a blocked web site, a message should appear identifying the party or parties which had obtained the blocking order and stating that the user had the right to apply to the court to discharge or vary the order; and
(c) a 'sunset clause' was incorporated, limiting the duration of the orders to a defined period, provisionally suggested to be two years.
Two main issues were raised by the defendants that were subject to considerable analysis in the judgment.
Issue 1: Did the court have jurisdiction to grant the orders sought?
Article 8(3) of the InfoSoc Directive requires Member States to ensure that copyright holders are able to apply for an injunction against intermediaries to prevent infringement by a third party. This was transposed into domestic law by the Copyright, Designs and Patents Act 1988, s 97A (as amended). Several such injunctions have already been granted under s 97A. However Article 11, the corresponding provision of the Enforcement Directive relating to all intellectual property rights, has not been specifically transposed into UK domestic legislation, so the defendants argued that the court did not have the jurisdiction to grant an injunction against an ISP for combating trade mark infringement by a third party.
Arnold J rejected this argument and held that the court does have jurisdiction to grant an injunction against an intermediary such as an ISP upon a purely domestic interpretation of the Supreme Court Act 1981, s 37(1), which states that the High Court may grant injunctions.
Although Article 11 of the Enforcement Directive has not specifically been implemented in the same way that Article 8(3) of the InfoSoc Directive has, the Enforcement Directive has, as a whole, been transposed into domestic legislation by the Intellectual Property (Enforcement, etc.) Regulations 2006. Government consultation papers published prior to the implementation of the Enforcement Directive clearly showed that the Government believed that no action was required in relation to Article 11 since the jurisdiction of the High Court to grant such injunctions derived from s 37(1).
Further, Arnold J held that, even if he was wrong about the power of the court to grant a web site blocking injunction in a trade mark case upon a purely domestic interpretation of s 37(1), the court had an obligation under the Marleasing principle to interpret s 37(1) to give effect to Article 11.
Issue 2: What factors should be considered when determining whether the Order should be granted?
With jurisdiction having been established, the court considered the various factors that should be considered as to whether the orders should be granted.
Arnold J concluded that the threshold conditions for exercising the jurisdiction to grant an injunction in a trade mark case were the same as those set out in previous case law relating to s 97A orders and that they had been satisfied in this case, namely that:
(a) the defendants were service providers;
(b) users of the websites infringed the claimants' rights;
(c) users of the websites used the defendants' services to do so; and
(d) the defendants had actual knowledge of this.
Another key factor that needed to be assessed when deciding whether to grant the orders and, if appropriate, what form they should take, was the requirement that the orders be proportionate. Arnold J listed six factors that should be considered:
Arnold J considered a considerable amount of expert evidence, including the technology available to the ISPs for the implementation of such orders, and concluded that the key question on proportionality in this case was that relating to costs.
Two separate aspects to costs were considered: first, which costs regime the court should apply if web site blocking orders were granted; and secondly, what the consequences were on the ISPs of implementation of that approach.
Previous s 97A orders had determined that the right-holders should bear the costs of the application and Arnold J concluded that it would be right to do so in this case, although did not rule out the possibility that this may not always be so.
When considering the second point, it was not sufficient to consider only the costs incurred in implementing the orders subject to the current application, which were relatively insignificant compared with the relative turnovers of the ISPs. The court also needed to take into account the possible costs that would be incurred should the decision to grant an order in this case open the floodgates to large numbers of other applications for orders to block web sites which infringe trade marks. Since evidence had been adduced showing that there were huge numbers of web sites infringing the trade marks of the current claimants alone, appropriate safeguards were required in order to ensure that ISPs were able to apply to court to vary or discharge the orders if the costs of implementation became significant as a result of a large number of applications.
Arnold J therefore concluded that, although the ISPs should bear the cost of implementation of the orders, this would be subject to introducing the safeguards mentioned above.
The Internet has become an increasingly important channel of trade in counterfeit goods which cause damage to trade mark owners. This important decision introduces a new method for brand owners to tackle online counterfeit sales. However, assuming that the decision in this case is followed in respect of future applications for web site blocking orders, the costs of such applications will be borne by the trade mark holder. Since these costs are likely to be significant, trade mark holders are likely to concentrate their resources and request blocking orders only in respect of web sites that they believe are causing significant damage to their business.
Although it is possible that the ISPs could choose to absorb the costs of implementation themselves, as the number of blocking orders granted by the court increases with time, it is possible that these costs would have to be passed on to the consumer, in the form of higher subscription fees for their internet services.
The full text of the decision can be found here.
Susan Barty is a partner within the Commercial Department at CMS Cameron McKenna LLP. Tom Reid is an IP Solicitor there. Tom Scourfield is a partner and the UK Head of IP there.