National Intellectual Property Laws in e-commerce
Cartier International AG and others (respondents ) are three Swiss or German companies belonging to the Richemont Group. They design, manufacture and sell luxury branded goods such as jewellery, watches, and pens under well-known trademarks including Cartier, Montblanc, and IWC.
Cartier International AG and others (Respondents)
v.
British Telecommunications Plc and another (Appellants)
[2018] UKSC 28
Background
The two appellants and three other defendants in the proceedings (who did not participate in the appeal) are the five largest internet service providers (“ISPs”) serving the United Kingdom, with a combined market share exceeding 90%.
National Intellectual Property Laws in e commerce from kashyap Partners & Associates
Injunctions Cost of Blocking Websites
The respondents sought injunctions requiring the ISPs to block or attempt to block access to specified ‘target websites’, which are advertising and selling counterfeit copies of the respondents’ goods, in addition to various other internet addresses whose purpose is to enable access to a target website.
The ISPs provide networks by which subscribers access to content, but they neither provide nor share content. They do not themselves infringe the relevant trademarks. Lower Court Judge had granted an injunction and ordered the ISPs to pay the costs, including the costs of implementing the website-blocking order. The Court of Appeal dismissed the ISPs appeal.
The appeal to the Supreme Court was made only for the costs. The main issue was whether the respondents should have been required to bear various costs of implementing the website-blocking order.
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Judgment
The Supreme Court unanimously allowed the appeal, so far as the cost of complying with the injunction. The respondents will be ordered to indemnify the ISPs for the disputed implementation costs, but the judge was entitled to order the ISPs to pay the litigation costs.
Reasoning
The Justices stated that compliance costs as a matter for English law and the ordinary principle under English law are that an innocent intermediary is entitled to be indemnified by the rights-holder against the costs of complying with the order.
The position is no different for website-blocking orders than any other order granted to require an innocent party to assist the claimant in the assertion of its rights against a rights-holder. The Court found no reason why the rights-holder should be entitled to look for a contribution to the costs of defending its rights to anyone other than the infringers.
Analysis
The decision will have a huge impact over all kinds of rights-holder who seek a website-blocking injunction within the territory of the UK against an ISP. Since it’s a fast-growing industry, the internet has provided infringers with a powerful tool for selling counterfeit copies of branded luxury goods, generally of lower quality than the genuine article and at a lower price, which was the biggest issue in this case. And, faced with such ever-growing volume of online infringement, the rights-holders will be troubled with today’s decision which will ultimately shift the cost of blocking websites from the ISPs to the rights-holders.
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Although the decision applies to ‘reasonable’ compliance costs and the Court based its decision on evidence that costs from the order would be ‘modest’, the result may impact a rights-holders strategy for applying for website-blocking orders on a mass-scale, which is often necessary for relation to counterfeit goods.
Another problem that could arise is that disputes as to what ‘reasonable’ compliance costs imply would be initiated in the Courts and hence, there might be a need for regulators to step in.
In either case, it is a victory for the ISPs but a defeat for the rights-holders as their troubles have just increased from just infringement issues to the compliance costs that go along with it. This decision does not apply to ISPs engaging in caching or hosting because they are not necessary ‘innocent’.
Lord Sumption had stated that different considerations may apply to those ISPs engaging in caching and hosting because it is more likely that national intellectual property laws will be infringed if the conditions of immunity for caching and hosting under the E-Commerce Directive are not met.
– Ramanpreet Sidhu, Associate